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    • UKParliament
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    • By UKParliament Verified User verified user 26th Sep 17, 9:23 AM
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    UKParliament
    Have your say on rent as evidence that people can meet mortgage repayments
    • #1
    • 26th Sep 17, 9:23 AM
    Have your say on rent as evidence that people can meet mortgage repayments 26th Sep 17 at 9:23 AM
    Do you think lenders should use rent payments as evidence that people can meet mortgage repayments?

    MPs want to hear your views on a petition calling for paying rent to be enough proof that people are able to meet mortgage repayments. The petition reads:

    “Make paying rent enough proof that you are able meet mortgage repayments

    Since living on my own I have paid £70,000+ in rent on time yet still struggle to get a mortgage. Unless you’re getting handouts, wealthy or in receipt of inheritance it's almost impossible. I want paying rent on time to be recognized as evidence that mortgage re-payments can be met.”

    In particular, the Petitions Committee want to hear your views on:
    • Do you agree with the petition? Why/ why not?
    • What other things do you think mortgage lenders should take into account when assessing eligibility?
    • How much do you think the UK Government and Parliament should interfere with the eligibility criteria mortgage lenders use? Is this a decision that should be made by banks and building societies? Or should the Government and Parliament play a role?

    Contributions posted on this thread before 18 October will be summarised and shared with MPs taking part in a debate on this petition.

    Watch the debate from 4.30pm on Monday 23 October 2017 on Parliament TV.

    Official Organisation Representative
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Page 1
    • harshitguptaiitr
    • By harshitguptaiitr 26th Sep 17, 9:38 AM
    • 89 Posts
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    harshitguptaiitr
    • #2
    • 26th Sep 17, 9:38 AM
    • #2
    • 26th Sep 17, 9:38 AM
    1 - The credit application system is designed to be anti-shop around. Someone looking for credit (mortgage, loan, credit card) won't know for sure if they will get it or not unless they apply for it, which leaves a mark on their credit file and affect their chances of getting the credit elsewhere. MSE has credit club which gives a guideline but the outcome is not 100% guaranteed.

    2 - Paying rent every month on time is not reported to credit reference agencies and hence not added onto credit file or credit score. All letting agents and landlords should have a system of reporting rent payments to Experian. This will make sure lenders are able to use the rent payment as an input towards making decision on granting credit or not.
    • kingstreet
    • By kingstreet 26th Sep 17, 10:48 AM
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    kingstreet
    • #3
    • 26th Sep 17, 10:48 AM
    • #3
    • 26th Sep 17, 10:48 AM
    Letting agents have far too much power over tenants as it is.

    They can determine how much of a deposit is returned and what 'damage' they feel warrants retention.

    I would not, on any planet ever, want letting agents to be able to influence a tenant being able to get any kind of credit; the kind of influence they would have if they were permitted to feed data to CRAs.

    Some lenders do ask applicants for evidence of rent payments.

    Paying rent or indeed paying an existing mortgage is very much an expectation of a lender, rather than a positive/negative and isn't something which does (or should IMHO) trump someone's overall financial/credit history.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • stator
    • By stator 26th Sep 17, 12:11 PM
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    stator
    • #4
    • 26th Sep 17, 12:11 PM
    • #4
    • 26th Sep 17, 12:11 PM
    The mortgage affordability rules have gone too far and mortgage lenders are being too discriminatory, not because they don't want to lend money and risk the borrower defaulting, but because they don't want to fall foul of regulatory tickbox rules.
    So yes, I think some kind of official system is needed to record and provide the rental payment information to mortgage lenders and the regulators should allow lenders to take this into account.
    This could simply be a form that landlords/rental agents are required to provide, on request, for a nominal sum, that gives details of past rental payments made on time.
    Changing the world, one sarcastic comment at a time.
    • ACG
    • By ACG 26th Sep 17, 12:25 PM
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    ACG
    • #5
    • 26th Sep 17, 12:25 PM
    • #5
    • 26th Sep 17, 12:25 PM
    The mortgage affordability checks lenders do are based on a certain rate, they are not based on the rent you pay at the minute. I do regularly hear people say I pay £x in rent, I can afford a Mortgage. That may be true whilst rates are at rock bottom but that is not what lenders are checking affordability against. Typically they are assessing the applicants against rates of closer to 10%.

    I have never had anyone declined because they pay rent and can not evidence it on a credit report (as far as I am aware). If an underwriter is overly concerned, then they could ask for bank statements to evidence the payments. Barclays and Pepper tend to do this on most cases as standard, I am sure there are others but those 2 spring to mind.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • amnblog
    • By amnblog 26th Sep 17, 12:27 PM
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    amnblog
    • #6
    • 26th Sep 17, 12:27 PM
    • #6
    • 26th Sep 17, 12:27 PM
    The Government's response here is in line with the focus of post 2008 regulation. Cannot see this going anywhere. As KS says, paying your rent in full and on time is a minimum. A property owner has potential higher costs and risk than a renter which is reflected in current affordability calculations.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • wantonnoodle
    • By wantonnoodle 26th Sep 17, 1:11 PM
    • 218 Posts
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    wantonnoodle
    • #7
    • 26th Sep 17, 1:11 PM
    • #7
    • 26th Sep 17, 1:11 PM
    When we bought our house last year, our lender wanted to see bank statements showing evidence of our rental payments being made consistently on time. So, some lenders are already reviewing the ability to pay rent.
    • getmore4less
    • By getmore4less 26th Sep 17, 1:17 PM
    • 30,847 Posts
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    getmore4less
    • #8
    • 26th Sep 17, 1:17 PM
    • #8
    • 26th Sep 17, 1:17 PM
    Landlords(AST,lodgers house shares etc) having to report rent payments to another organisation.

    How many forget to let HMRC know.
    • tom9980
    • By tom9980 26th Sep 17, 1:58 PM
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    tom9980
    • #9
    • 26th Sep 17, 1:58 PM
    • #9
    • 26th Sep 17, 1:58 PM
    Why when a bank simply should ask for 12 months statements and a copy of the tenancy agreement. This will show how much rent is due and the statements can confirm it has been paid on time.

    Governments creating more red tape and admin is not something anyone should welcome.
    “In order to change, we must be sick and tired of being sick and tired.”
    • Lysimache
    • By Lysimache 26th Sep 17, 11:04 PM
    • 96 Posts
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    Lysimache
    People with regular stable income who don't meet the usual 'basic pay' criteria!
    It would be useful for Parliament to review how typical mortgage providers assess different types of income. One person earning £50k regularly may be viewed differently to another person earning £50k regularly from other sources - and the income multiplier used by banks may offer those two people very different sizes of mortgages.

    This can often feel very unfair to people taking out a mortgage, especially if they have reliable incomes but the unusualness of their income forces them to go to smaller mortgage companies or providers with higher rates.

    For example, junior doctors often find their out of hours income - even though the out of hours work is regular, predictable and expected, and compulsory - is not counted 100% as income because many mortgage firms do not view it the same as 'basic income'.

    This means many can only access mortgages via brokers or have a smaller choice of lenders, increasing costs. It can come as a shock to them that their income is viewed as iffy.
    Last edited by Lysimache; 26-09-2017 at 11:14 PM.
    • Lysimache
    • By Lysimache 26th Sep 17, 11:14 PM
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    Lysimache
    Another problem is some people may have stable jobs but work on 6-monthly contracts at a time. The full extent of these people's income can again be ignored by some mortgage providers but not others when calculating the max mortgage value to lend on. More consistency and more openness in how income is calculated and viewed by different providers when they do their affordability calculations would help open up more of the market to such people.

    'Computer says no' due to odd rules on what counts as full income or doesn't is very frustrating.
    • Thrugelmir
    • By Thrugelmir 26th Sep 17, 11:15 PM
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    Thrugelmir
    More consistently and more openness in how income is calculated and viewed by different providers would help open up more of the market to such people.
    Originally posted by Lysimache
    Lending is a business. Like supermarkets. Finance houses target different mortgage market segments. Mortgages aren't like selling cans of baked beans. Volume isn't the name of the game.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • Sambella
    • By Sambella 26th Sep 17, 11:46 PM
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    Sambella
    I like this idea of taking rent into account for mortgage affordability so long as it is done sensibly.
    • kingstreet
    • By kingstreet 27th Sep 17, 8:08 AM
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    kingstreet
    I like this idea of taking rent into account for mortgage affordability so long as it is done sensibly.
    Originally posted by Sambella
    Are you going to link the words 'sensible' and 'this Government?'

    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • getmore4less
    • By getmore4less 27th Sep 17, 10:32 AM
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    getmore4less
    Another tool for sensible lending is limit the liability of the borrower to the asset securing the loan.

    Although that would probably restrict lending rather than open it up which is the goal.

    on another note there could be room for lenders to be more flexible on deposit/rates.

    There are those that are income rich but cash/deposit poor, current schemes are all external help there are none where the borrower can use Their own income to support a better deal

    The idea is something like you get 2 years to improve the equity by bigger payments

    The bigger the commitment the better the rate you get

    A typical payment for 2 years will get around 5% off the debt if you commit to say 10% with a bigger payment you get the next rate down

    eg. if you start at 95% LTV and commit to getting to 85% LTV you can have the 90% rate

    For longer fixes you could introduces some interets rate stepping if you hit the targets with overpayments
    • UKParliament
      Verified User verified user
    • By UKParliament Verified User verified user 9th Oct 17, 12:28 PM
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    • 555 Thanks
    UKParliament
    Hi Everyone,

    There is just over a week left to share your thoughts on this.

    Thanks!
    Official Organisation Representative
    I’m the official organisation rep for the House of Commons. I do not work for or represent the government. I am politically impartial and cannot comment on government policy. Find out more in DOT's Mission Statement.

    MSE has given permission for me to post letting you know about relevant and useful info. You can see my name on the organisations with permission to post list. If you believe I've broken the Forum Rules please report it to forumteam@moneysavingexpert.com. This does NOT imply any form of approval of my organisation by MSE
    • Mrpear
    • By Mrpear 9th Oct 17, 2:22 PM
    • 12 Posts
    • 1 Thanks
    Mrpear
    As a youngster, I was taught when I first moved into my rented house that you must never miss a payment on your rent and your council tax.

    I didn’t really understand a credit report or score and saw those two bills as my absolute priority.

    To the point that at 20, I defaulted on credit cards, mobile phones and other less bills just to keep the rent and council happy.

    Thankfully now, as you get older you learn more!

    But my current rent (since 2015) is £1,900, and has never been missed by a day.

    I’m in the process of a mortgage application at 85% LTV and jumping through hoops for a mortgage that will be £1,200.

    From my experience, the lender we are using has already asked for evidence of paid rent on time. So I don’t see how this isn’t already taken into consideration?
    • NineDeuce
    • By NineDeuce 9th Oct 17, 2:34 PM
    • 540 Posts
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    NineDeuce
    I am 100% an advocate of saying that rent payments are evidence of mortgage payment affordability.

    I think that banks should use this to lend the full amount of money for a property price and not require huge deposits.

    Without this, too much power is with estate agents, property moguls and buy to letters.

    It is ludicrous that a tenant is effectively asked to show that they can, for example, pay £900 pm (i.e. £650 rent, £250 deposit savings) for years on end to pay a £750pm mortgage payment, when a buy to letter just needs to get a tenant in to pay off his mortgage for him.

    The housing system will always be completely broken until just about everybody has a realisitic chance of buying a home...
    • glosoli
    • By glosoli 9th Oct 17, 7:27 PM
    • 675 Posts
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    glosoli
    I think that banks should use this to lend the full amount of money for a property price and not require huge deposits.
    Originally posted by NineDeuce
    All fine and well if house prices are rising, but if theres a fall?
    • VintageHistorian
    • By VintageHistorian 9th Oct 17, 8:55 PM
    • 274 Posts
    • 1,785 Thanks
    VintageHistorian
    I agree with the petition. For quite a lot of people the cost of mortgage payments on a house will be less than the rent they would pay on a similar sized property. For example my mortgage payments are £666 a month for a three bedroom terraced house in a corner of Essex. A quick look on Rightmove tells me that a house round the corner, 2 bedroom terraced, is going for £800 a month. A 1 bedroom end of terrace two streets away is listed for £595 a month. Bills are not included in either of these.

    If someone has consistently managed to meet these payments and similar, year on year, then why would they suddenly not do so for a mortgage?

    Of course people will say that you need to remember that you're then responsible for arranging repairs on your own home. But when you're renting a well-informed landlord will be setting aside part of your monthly rent payment to cover emergency costs anyway. They can even claim back some of your deposit at the end for repairs and the like (and a quick look at some of the threads in this forum will tell you just how many people are still unaware of their rights regarding deposit deductions).

    What else should banks do?
    With so many people in temporary contracts I think more needs to be done to encourage lenders to take in to account people who aren't in a stereotypical permanent job. We had trouble getting a mortgage because I'm on a 2 year contract with one of the largest educational establishments in the country. In the end Halifax offered us a mortgage because my previous job had been a permanent contract in a similar role (I moved as I was offered a larger wage and a step up the career ladder). I've since had my contract extended by another year and received a further promotion, my temporary contract is simply the nature of my employer rather than a negative reflection on my dedication to my role.

    Nationwide wouldn't give us the time of day, NatWest would lend but at a higher interest rate. A look at the Barclays website at the time wasn't favourable, I'm not sure about other banks.

    Should government interfere?
    I fear that there is going to be a significant increase in the number of people in self-employed work or temporary contract work in the coming decade. If the government is unwilling to do anything about people being forced down this path then they need to make sure that the things those people need, safe housing being a key one, is still available to them. I'm a little wary of the word "interfere", but certainly I think that the government needs to be investigating ways to ensure that people with incomes within affordability limits but not necessarily "stable" jobs can still buy a house.

    The big risk is that these people are going to hit 70 with no home in their name (because they had to spend their lives renting), no pension provided by their workplace (because they didn't have a workplace), very few savings (because of the aforementioned higher rents) and nowhere to turn to except the government. Good luck with that.
    "You won't bloom until you're planted" - Graffiti spotted in Newcastle.

    Make £3 a Day in September 2017 - £29.31/£90 (2017 total - £164.27) | Womble #03 - £4.32 | Overpayments in 2017 - £1063.78
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